Canadian traders are letting down their guard and joining the U.S. rally in stocks today. The S&P/TSX index is up 42 points at midday to 6,529.

Volume is very weak at 62 million shares though, with the split between buying and selling pretty even. Market breadth is slightly positive, with winners edging losers by a 14:13 margin.

There is sector strength in energy, diversifieds, and health care. More modest gains are evident in the techs and telecoms, financials and consumer stocks.

All of these upside moves come in the face of a weak Ivey purchasing managers report. Golds are the weak spot, as investors take some profits in that group to rotate into other sectors.

BCE is providing the strength in the telecom group today, gaining in heavy trading as the market digests its latest $2 billion offering. Alcan is bouncing back today, gaining 2%.

There’s also strength in a broad selection of names, including EnCana, Suncor Energy, Precision Drilling, Inco and Teck on the resources side. Molson, Gildan, Biovail, Celestica and Ballard Power are all trading compellingly higher, too.

This broad strength is flowing over to support the financials. CIBC, Royal bank and Manulife Financial are all higher in active trading.

The weak Ivey report is whacking stocks such as Hudson’s Bay and Saputo. Much of the rest of the weakness is in golds, as they back off recent gains. Losers include Glamis, Goldcorp, and TVX Gold. There’s also some weakness in names such as Bombardier, CAE, Mosaid, Astral Media and Shaw Communications.

In earnings news, Trizec Canada recorded a net loss of $19.7 million in its latest quarter, after a deduction of $20.3 million related to non-controlling interests, compared with a loss of $35.1 million for the same period in 2001.

In New York, stocks have had a pretty choppy session this morning, but all the big indexes are up at midday. The Dow Jones industrial average has gained 66 points to 8,523. The S&P 500 is up nine points to 886. The Nasdaq composite index has added just three points to 1,283.

The pullback in golds is hitting Canadian small caps. The S&P/TSX Venture index is down nine points at midday to 1,028. Volume is weak there too at just 8.7 million shares. the top trader on the day is Hydromet Environmental, which is up a penny to 5¢ per share on a mere 297,000 shares.